QYLD - QYLD: Two More Reasons To Sell

2024-06-27 12:56:57 ET

Summary

• Global X NASDAQ 100 Covered Call ETF is popular among income investors for high-yield and monthly payouts.
• Its current dividend yield of ~11% is indeed highly attractive in absolute terms.
• However, when benchmarked against risk-free rates, the yield spread is currently among the thinnest levels in multiple years.
• Investors willing to DIY the strategy can also bypass most of the fees.

QYLD ETF has underperformed

I last wrote on the Global X NASDAQ 100 Covered Call ETF (NASDAQ: QYLD ) about three months ago in an article entitled " QYLD: Risks Outweigh Upside Potential ." In that article, I argued for a sell thesis and my key considerations were quoted below:

The current dividend yield of 11%+ may not be sufficient to compensate for the downside risks. The current option premium is relatively low (because of the low implied volatility) while downside risk is high given the elevated P/E of the Nasdaq index.

For further details see: